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The basics of Medicare-related insurance decisions

By Scott Burns, February 6, 2014

Please give us some information about Medicare Advantage plans. Our insurance company switched us to one last year, and we’re not sure that it is the best option for us.


Medicare Advantage plans function as a substitute for Medigap insurance. Seniors have three fundamental choices when they turn 65. They must sign up for Medicare and enroll in Medicare Part B for medical coverage and Medicare Part D for prescription coverage.

Medicare, however, doesn’t cover all costs and, more important, does not have a limit on our out-of-pocket expenses.

Medigap policies are standardized insurance policies from private insurers that cover many of the expenses not covered by Medicare and also have an out-of-pocket expense limit, typically $5,000 to $6,700. These policies become more expensive as you age, which means their premiums can become intimidating.

Medicare Advantage plans are private health insurance plans that wrap around Medicare and provide additional benefits and an out-of-pocket limit, much like a Medigap policy. The additional premium for these plans varies from $0 to about $100 a month, in addition to the basic Medicare Part B premium. Some also include prescription drug coverage.

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